Western senators want refineries probed over high gasoline prices

Published: Wednesday, Nov. 28, 2012 9:23 a.m. CDT

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(MCT) — WASHINGTON — Six U.S. senators from West Coast states urged the Justice Department on Tuesday to conduct a refinery-by-refinery probe to determine the causes of punishing gasoline price spikes earlier this year.

“We are requesting a Department of Justice investigation of possible market manipulation and false reporting by oil refineries, which may have created a perception of a supply shortage, when in fact the refineries were still producing,” said the letter sent to Attorney General Eric Holder.

Signing the petition were Sens. Barbara Boxer and Dianne Feinstein of California, Ron Wyden and Jeff Merkley of Oregon, and Maria Cantwell and Patty Murray of Washington, all Democrats.

Their letter followed a mid-November report presented to a California state legislative committee by McCullough Research that used environmental data to show that refineries were making gasoline in May, during a period in which news reports said they were offline.

The McCullough findings, first reported by McClatchy Newspapers, provoked controversy in West Coast states, where motorists were paying at least 50 cents more per gallon in May and October than motorists in the rest of the nation were. The McCullough report alleges there was production in May but stops short of the same accusation for October, the other spike period, as environmental data wasn’t yet made public.

West Coast motorists were led to believe that the price spikes were tied to outages and production problems, but McCullough showed that inventories were building at a time when there were news reports, which refiners didn’t dispute at the time, of possible supply shortages. That all happened as the price of crude oil, the key component needed to make gasoline, was falling.

Refiners dispute the allegations by McCullough Research and the six senators.

“The petroleum industry operates under a microscope of government regulation and provides enormous amounts of data to the appropriate state and federal agencies,” said Tupper Hull, a spokesman for the Western States Petroleum Association, which represents the refiners.

“The industry has been subjected to dozens of investigations over the past 20 years, and all of them have determined that the dynamics of supply and demand are what determine the price of fuel. If the Department of Justice decides to conduct another investigation, we are confident they will reach the same conclusion.”

Pointing to conclusions in a California Energy Commission market report, Hull added that “West Coast markets experienced real and demonstrable disruptions in supply during the summer and late fall. These unfortunate and unavoidable disruptions resulted in price spikes, which quickly abated when supplies were restored.”